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Transferring Assets from a 403(b)

Q. A prospective client started a 401(k) on Jan. 1, 2015 but did not terminate their 403(b). The broker handling the event did a poor job, and the client is concerned it was not done right. Can the employer’s 403(b) assets (including active loans) be transferred for active and terminated participants to its 401(k) without terminating the 403(b)? (Note that the plan document does not permit in-service withdrawals.) What are the qualification issues with this? Since this happened on Jan. 1, 2015, assuming the answer is ‘no,’ is there any corrective action the employer can take?

A. No, assets cannot be transferred from the 403(b) plan to the 401(k) plan. If participants have a distributable event, however, the 403(b) assets could be rolled over to the 401(k) plan (or to an IRA). If the 403(b) plan is funded with individual accounts, any movement of money would need to be authorized by each individual participant, because the employer would not have the authority to arbitrarily move those monies. Since an ineligible transfer has taken place, the employer should review Revenue Procedure 2013-12 for guidance on the correction methodology. 

04/09/2015


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